The unemployment rate keeps going up, but the economy keeps adding jobs. That's the odd position we've been in for months now, after the June jobs report showed the U.S. adding another 206,000 jobs, but the unemployment rate rising again to 4.1%.wrote Renaissance Macro on X after the report."Conditions in the labor market are cooling off," as payroll growth has slowed to 177,000 the past three months on average, versus nearly 300,000 a year ago.
"If they don't cut this month, they ought to make a strong signal a cut is coming in September," RenMac wrote. The Fed's next meeting is on July 30-31, and markets are currently only pricing in a 5% chance of a cut then."The labor market is still healthy, but...restrictive policy is taking its toll,"unexpectedly dove into contraction
, with a reading of 48.8 . Manufacturing meanwhile--which bulls were hoping would return to growth after years of post-pandemic contraction--remained below 50 for the third straight month, we learned on Monday. And yet the stock market has continued to move higher in the face of such data this year. Perhaps investors expect rate cuts will ultimately help keep the business cycle going.,"'The Market' no longer represents the stocks IN the market."
The 10 largest stocks now comprise 37% of the S&P 500, he noted , while correlations are at a record low for the data going back twenty-plus years."Is having a target on the S&P 500 really that helpful if only a handful of stocks are representing that?" he asked.All of the big tech stocks, of course, are benefitting from the rise of AI.